Opinion
Gary Tsirelman, P.C., Brooklyn, for appellant.
Bee Ready Fishbein Hatter & Donovan, LLP, Mineola (Michael Krall of counsel), for respondent.
Present: WESTON, J.P., GOLIA and RIOS, JJ.
Appeal from an order of the Civil Court of the City of New York, Kings County [927 N.Y.S.2d 279] (George J. Silver, J.), entered March 26, 2009. The order granted defendant's motion to vacate a judgment entered on November 21, 2008 and directed a recalculation of interest.
ORDERED that the order is reversed, without costs, defendant's motion to vacate the judgment entered on November 21, 2008 is denied and the judgment is reinstated.
Plaintiff commenced this action to recover assigned first-party no-fault benefits on October 5, 2005 and subsequently moved for summary judgment. Defendant opposed plaintiff's motion. By order dated November 2, 2007, the Civil Court granted plaintiff's motion, finding, among other things, that defendant had not established that its denials had been timely mailed. In a judgment entered on November 21, 2008, plaintiff was awarded the principal amount sought plus statutory interest and attorney's fees. In the judgment, interest was calculated on each of the 12 claims at issue to commence 30 days after defendant's receipt of each claim, as indicated on defendant's claim denial forms.
Shortly after entry of the judgment, defendant moved, pursuant to CPLR 5015, to vacate the judgment, arguing that plaintiff was not entitled to the full amount of the judgment because the interest had been improperly calculated. Defendant contended that plaintiff was entitled to interest only from October 5, 2005, the date that plaintiff had commenced the action, and not, as plaintiff had computed, from 30 days after defendant's receipt of the claim forms at issue. By order entered March 26, 2009, the Civil Court granted defendant's motion to vacate the judgment and directed that the amount of interest awarded be recalculated to run from October 5, 2005 until November 2, 2007. This appeal by plaintiff ensued.
Insurance Law § 5106(a) provides that first-party benefits are overdue " if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained ... [and that] overdue payments shall bear interest at the rate of two percent per month." If arbitration is not requested or an action is not commenced " within 30 days after the receipt of a denial of claim form or payment of benefits calculated pursuant to Insurance Department regulations, interest shall not accumulate on the disputed claim or element of claim until such action is taken" (Insurance Department Regulations [11 NYCRR] § 65-3.9[c] ). Furthermore, if a dispute has been submitted to arbitration or to the courts, " interest shall accumulate, unless the applicant unreasonably delays the ... court proceeding" (Insurance Department Regulations [11 NYCRR] § 65-3.9[d] ). Where, as here, a defendant has not established the proper mailing of the denial of claim form, the claim is considered not to have been denied and payment of benefits will therefore be considered to be " overdue" within the meaning of Insurance Law § 5106(a). Accordingly, interest on the claim will not be tolled ( cf. LMK Psychological Servs., P.C. v. State Farm. Mut. Auto. Ins. Co., 12 N.Y.3d 217, 223, 879 N.Y.S.2d 14, 906 N.E.2d 1046 [2009] ), and commences to accrue " 30 days after the claim was presented to the defendant for payment until the date the claim was or is paid" ( Hempstead Gen. Hosp. v. Insurance Co. of N. Am., 208 A.D.2d 501, 617 N.Y.S.2d 478 [1994] ). As plaintiff calculated interest on the claims in question as commencing 30 days after defendant's receipt of said claims, the Civil Court erred, in its order entered March 26, 2009, in directing that interest be recalculated from the date of the commencement of the action. Similarly, it was error to direct that interest accrue until the date of the order [927 N.Y.S.2d 280] granting plaintiff's motion for summary judgment, since interest accrues " until the date the claim was or is paid" ( id. ). It is noted that plaintiff is not entitled to interest pursuant to the Civil Practice Law and Rules, since Insurance Law § 5106(a) and the regulations promulgated thereunder supersede the provisions for interest contained in the CPLR ( Matter of Government Empls. Ins. Co. [Lombino], 57 A.D.2d 957, 959, 394 N.Y.S.2d 898 [1977]; see also Smith v. Nationwide Mut. Ins. Co., 211 A.D.2d 177, 626 N.Y.S.2d 619 [1995] ).
Accordingly, the order is reversed, defendant's motion to vacate the judgment is denied, and the judgment entered on November 21, 2008 is reinstated.
WESTON, J.P., and RIOS, J., concur.
GOLIA, J., concurs in part and dissents in part in a separate memorandum.
GOLIA, J., concurs in part and dissents in part and votes to reverse the order and remit defendant's motion to vacate the judgment to the Civil Court for a determination de novo following a hearing to determine the actual date the denial of claim forms were received by plaintiff.
Although I disagree with the majority in finding that the accumulation of interest will not be tolled until after a denial of claim (NF-10) was received by plaintiff, I am constrained to accept that analysis in view of a recent opinion letter issued by the Superintendent of the Insurance Department.
Opinion of the General Counsel N.Y. Ins. Department No. 10-09-05, dated September 14, 2010, states:
" 2 ... Interest is not tolled during the period that a claim becomes overdue until the insurer issues to the insured the denial of claim. Interest is only suspended or tolled from the date the claimant fails to commence an action within 30 days of the receipt of the denial of claim form until an action is actually commenced."
Nevertheless, I find that the majority's holding here that, " Where, as here, a defendant has not established the proper mailing of the denial of claim form[s], the claim is considered not to have been denied ..." is inappropriate.
A careful reading of the November 2, 2007 order of the Civil Court does not indicate, as the majority states, that defendant failed to establish " the proper mailing of the denial of claim form[s]" (emphasis added). The Civil Court simply found that " the affidavits proffered by defendant's agents ... did not establish ... that defendant's denials were timely mailed " (emphasis added). There is a distinction.
A defendant's failure to prove timely mailing may well result in summary judgment for the plaintiff. However, as was made abundantly clear by the Court of Appeals in LMK Psychological Servs., P.C. v. State Farm Mut. Auto. Ins. Co., 12 N.Y.3d 217, 879 N.Y.S.2d 14, 906 N.E.2d 1046 [2009], the untimely mailing of a denial of claim form will not stop the tolling of interest.
Thus, by the confusion raised in this distinction, I further recommend that the Insurance Department revisit and clarify this issue. The punitive interest assessed against a carrier for failing to timely pay a valid claim was meant to serve as a strong incentive to pay claims in a timely manner and to punish those that do not. It would be inappropriate to allow a plaintiff to intentionally choose not to prosecute its claim in hopes that the carrier would not be able to establish mailing or that the court simply finds that it has not. Under those circumstances, the plaintiff would be [927 N.Y.S.2d 281] receiving a windfall in excess of 24% interest per year for up to six years.
If the stated purpose of the No-Fault Law is to resolve claims expeditiously, then it must apply equally to the claimant as well as the carrier.